Millage rate is a vital component of any municipality’s budget and it’s important to understand how it works. A millage rate is a tax rate expressed in terms of mills, which are equal to one-tenth of one cent. This means that a millage rate of 10.5 would be equivalent to $0.105 on every dollar of taxable property value. Calculating millage rates is a complex task and it’s important to understand the process in order to ensure accuracy.
Step 1: Determine the Taxable Property Value
The first step in calculating the millage rate is to determine the taxable property value. This is the total value of all taxable property within the municipality. This value can be determined through a property assessment and can be found on the municipality’s assessment rolls. It is important to note that not all property is taxable and therefore the total taxable value should be used in the calculation.
Step 2: Calculate the Total Tax Levy
The total tax levy is the total amount of money that the municipality needs to raise in order to fund its budget. This figure is determined by the municipality’s budget and can be found in the municipality’s financial statements. This figure is important as it will be used as the denominator in the calculation of the millage rate.
Step 3: Calculate the Millage Rate
Once the total tax levy and the total taxable property value have been determined, the millage rate can be calculated. The formula for calculating the millage rate is as follows: millage rate = total tax levy / total taxable property value. For example, if the municipality’s total tax levy is $10 million and the total taxable property value is $1 billion, then the millage rate would be 10 mills or $0.10 on every dollar of taxable property value.
Step 4: Apply the Millage Rate
Once the millage rate has been calculated, it can be applied to the total taxable value of each property in the municipality. This will determine the amount of tax that is due for each property. It is important to note that the millage rate can vary depending on the municipality and can change from year to year. Therefore, it is important to stay up to date on the millage rate in order to ensure accuracy.
Step 5: Adjust the Millage Rate
Once the millage rate has been calculated, it can be adjusted if necessary. This can be done by either increasing or decreasing the millage rate in order to raise or lower the amount of taxes collected. For example, if the municipality is looking to raise additional revenue, then the millage rate can be increased in order to generate more revenue. On the other hand, if the municipality is looking to lower the amount of taxes collected, then the millage rate can be decreased.
Step 6: Re-Calculate the Millage Rate
Once the millage rate has been adjusted, it is important to re-calculate the millage rate in order to ensure accuracy. This can be done by using the same formula as before: millage rate = total tax levy / total taxable property value. It is important to re-calculate the millage rate as even a small error can result in a significant difference in the amount of taxes collected.
Conclusion
Calculating the millage rate is an important process in any municipality’s budgeting process. It is important to understand the process in order to ensure accuracy and to make sure that the correct amount of taxes are being collected. The process involves determining the total taxable property value, calculating the total tax levy, calculating the millage rate, applying the millage rate, and adjusting the millage rate as necessary. Once the millage rate has been adjusted, it is important to re-calculate the rate in order to ensure accuracy.